In a recent decision the Madras High Court observed that Section 248 of Income Tax Act, 1961 is inapplicable to Declaration and distribution of dividend by company to its shareholders.
The petitioner challenged an order by which its application for revision under Section 264 of the Income Tax Act, 1961 was rejected. The petitioner is engaged in the business of providing IT and IT enabled services. It filed its return of income for the assessment year 2018-2019 by admitting the total income of Rs.12,65,47,680/-.
During the financial year corresponding to the assessment year mentioned above, the petitioner declared and paid dividend of Rs.59,12,76,400/- to its holding company, M/s.Predictive Analytics Mauritius Holding Limited (PAMHL), which is a company incorporated in Mauritius.
After the intimation was issued pursuant to and based on the return of income filed by the petitioner, the petitioner applied for revision under Section 264 of the Income Tax Act before the Principal Commissioner of Income Tax. The said revision application was rejected on the grounds that the petitioner could have filed a revised return or an appeal under Section 248 of the Income Tax Act. The present writ petition arose in the said facts and circumstances.
With regard to the conclusion that an appeal could have been filed under Section 248 of the Income Tax Act, the counsel submitted that Section 248 is inapplicable to a case where DDT was computed at a higher rate. Since the petitioner has no other remedy in respect of the error committed in the return, the counsel submitted that the revision should not have been rejected on the grounds contained therein.
A Single Bench of Justice SenthilKumar Ramamoorthy observed that “On examining Section 248 of the Income Tax Act, it is evident that it applies to a case where the tax deducted on payments made under Section 195 of the Income Tax Act to a non-resident, other than by way of interest, is required to be borne by the person by whom the income is payable (i.e. the person making the payment) as per contract or arrangement between the parties and the person making the deduction claims that tax was not payable.”
“The case in hand pertains to the declaration and distribution of dividend by the petitioner, a company, to its shareholders and the tax payable thereon. This was not a case where a deduction was made under Section 195 towards tax on payments made to a non-resident and the parties had agreed that the deducting resident entity would bear the tax liability by compensating the non-resident by a proportional topup. Therefore, Section 248 is clearly inapplicable” the Court noted.
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